The central government is preparing a revised affordable housing policy framework expected to be notified within the next six months, real estate apex body CREDAI confirmed on Saturday. Speaking at a real estate industry briefing, CREDAI National President Shekhar Patel stated that inter-ministerial deliberations are underway to restructure the legal, regulatory, and fiscal criteria governing budget residential real estate in India.
The impending policy overhaul addresses a persistent supply-demand bottleneck in urban India. While demand for entry-level homeownership remains substantial among lower-middle-class and informal-sector households, the private sector has largely ceased launching projects under the existing affordable housing framework.
Developers attribute this supply collapse to the statutory definition introduced in 2017, which couples strict carpet-area limits with a hard price cap of ₹45 lakh. As land values, cement and steel prices, and municipal compliance charges surged over the past decade, building viable residential projects at or below ₹45 lakh in major metropolitan areas became economically impossible.
Anatomy of the Stalemate: The ₹45-Lakh Bottleneck
Under the current harmonized definition established across the Ministry of Housing and Urban Affairs (MoHUA), the Reserve Bank of India (RBI), and Goods and Services Tax (GST) statutes:
- Metros (Delhi-NCR, MMR, Bengaluru, Chennai, Hyderabad, Kolkata): Carpet area up to 60 square meters (approx. 645 sq ft) with an absolute cost ceiling of ₹45 lakh.
- Non-Metros: Carpet area up to 90 square meters (approx. 968 sq ft) with the same ₹45 lakh cost ceiling.
[ THE AFFORDABLE HOUSING VIABILITY GAP ]
2017 BASELINE BENCHMARKS 2026 MARKET REALITY
────────────────────────────────────── ──────────────────────────────────────
• Land costs: ~₹1,500–₹2,500/sq ft (outskirts) • Land costs: >₹4,500–₹8,000/sq ft (outskirts)
• Steel/Cement: Subdued input prices • Input materials up 45%–60% post-pandemic
• Metro unit construction: Feasible at ₹45L • Avg metro primary rates: ₹7,000–₹10,000/sq ft
│
▼
[ RESULT: ₹45L BUYS ONLY ~450 SQ FT, BELOW VIABLE 2BHK LIVING SPACE ]
With average primary market capital values across India’s top seven cities reaching ₹9,714 per sq ft (and Delhi-NCR touching ₹9,980 per sq ft in Q3 2026), a strict ₹45-lakh threshold restricts developers to constructing micro-units under 450 square feet. Such small layouts are widely rejected by urban Indian families seeking long-term residential stability.
According to Anarock Research, affordable housing accounted for nearly 40% of total residential sales in 2019. By mid-2026, that proportion had contracted to less than 18%, with developers shifting almost all fresh capital toward mid-premium, luxury, and ultra-luxury launches priced well above ₹1.5 crore.
CREDAI’s Reform Roadmap: Key Demands Submitted to the Centre
In its representations to the Ministry of Housing, Ministry of Finance, and state urban development authorities, CREDAI has outlined four primary structural interventions:
+─────────────────────────────────+─────────────────────────────────+─────────────────────────────────+
| Policy Dimension | Existing 2017 Framework | CREDAI Proposed Revision |
+─────────────────────────────────+─────────────────────────────────+─────────────────────────────────+
| Metro Carpet Area | Up to 60 sq meters (~645 sq ft) | Up to 90 sq meters (~968 sq ft) |
+─────────────────────────────────+─────────────────────────────────+─────────────────────────────────+
| Non-Metro Carpet Area | Up to 90 sq meters (~968 sq ft) | Up to 120 sq meters (~1,291 sq ft)|
+─────────────────────────────────+─────────────────────────────────+─────────────────────────────────+
| Price Ceiling | Capped strictly at ₹45 Lakh | **Completely Removed** |
| | (Uniform pan-India) | (Delinked from area criteria) |
+─────────────────────────────────+─────────────────────────────────+─────────────────────────────────+
| Home Loan Interest Deduction | ₹2 Lakh under Section 24(b) | ₹4–5 Lakh; parity extended |
| | (Old tax regime only) | to New Tax Regime (Sec 115BAC) |
+─────────────────────────────────+─────────────────────────────────+─────────────────────────────────+
| Credit Guarantee Structure | Limited direct PMAY CLSS | Dedicated CGTMSE-style scheme |
| | interest subvention (expired) | guaranteeing 80%–90% of loan |
+─────────────────────────────────+─────────────────────────────────+─────────────────────────────────+
1. Delinking Unit Pricing from Carpet Area
CREDAI’s primary request is the complete removal of the ₹45-lakh price ceiling, shifting the regulatory definition entirely to an area-based standard (90 sq m in metros and 120 sq m in non-metros).
Patel argued that delinking price allows regional real estate markets to discover natural price points based on localized land values while preserving vital tax and regulatory benefits—such as the 1% GST rate without Input Tax Credit (ITC) and priority lending status—for standard two-bedroom and three-bedroom family units.
2. Updating Section 24(b) Tax Deductions
The ₹2-lakh annual ceiling on home loan interest deduction has remained unchanged for over a decade. With modern home loans averaging ₹35 lakh to ₹50 lakh and mortgage interest rates hovering near 8.5% to 9%, an urban homebuyer’s annual interest outgo routinely exceeds ₹4 lakh.
CREDAI has urged the Finance Ministry to raise the deduction cap to ₹4–5 lakh for first-time, owner-occupied homes and introduce matching incentives under the simplified New Tax Regime.
3. Institutional Credit Guarantee for EWS/LIG
Low-income and informal-sector wage earners face high rejection rates from commercial banks due to the lack of formal income tax returns (ITR) or salary slips. CREDAI proposed establishing a self-sustaining Credit Guarantee Scheme for Affordable Housing, modeled on the MSME credit guarantee framework (CGTMSE), to cover 80% to 90% of default risk for loans granted to Economically Weaker Section (EWS) and Lower Income Group (LIG) buyers.
Competing Views: The Risk of Price Dilution
While developers emphasize supply-side viability, consumer rights advocates and urban economists urge caution regarding the outright removal of price caps:
[ THE POLICY TRADEOFF DEBATE ]
DEVELOPERS & SUPPLY ADVOCATES URBAN ECONOMISTS & CONSUMER GROUPS
───────────────────────────────────── ──────────────────────────────────────
• High land costs prevent building at ₹45L. • Removing price caps entirely allows luxury
• Expanding definition to 90 sq m restores builders to claim 1% GST concessions on
tax viability and private capital appetite. ₹1.5-crore metro apartments.
• Prevents peripheral urban ghettoization. • Dilutes targeted welfare away from the true
economically weaker sections (EWS).
Critics note that if a 90 sq m apartment in central Gurugram or Mumbai is designated as “affordable housing” purely based on area, a unit priced at ₹1.5 crore would qualify for subsidized 1% GST and concessional institutional developer financing.
Consequently, ministry officials are reportedly evaluating city-tiered price caps—such as ₹65 lakh to ₹75 lakh in tier-1 metros, ₹55 lakh in tier-2 cities, and ₹45 lakh in smaller towns—rather than eliminating valuation ceilings entirely.
What Happens Next: The Six-Month Implementation Path
As the Ministry of Housing and Urban Affairs reviews industry feedback alongside inputs from the Reserve Bank of India, several administrative milestones will shape the rollout:
- Inter-Ministerial Committee Recommendations: A joint working committee comprising representatives from MoHUA, the Department of Revenue, and the Department of Financial Services will finalize a draft cabinet note on revised definitions.
- GST Council Consensus: Any changes to unit pricing thresholds or carpet area eligibility for concessional 1% GST must receive formal ratification from the GST Council.
- PMAY-Urban 2.0 Integration: The revamped definition will directly anchor the execution of the central government’s Pradhan Mantri Awas Yojana-Urban (PMAY-U) 2.0, which aims to facilitate the construction of 1 crore additional urban homes through subsidized interest subvention and credit-linked subsidies.
Frequently Asked Questions
When will the Centre revise the affordable housing policy?
According to CREDAI National President Shekhar Patel, the central government is actively working on the revised framework and is expected to finalize and introduce the new affordable housing policy within the next six months (by early 2027).
Why is CREDAI demanding the removal of the ₹45-lakh price cap?
The ₹45-lakh ceiling was fixed in 2017. Over the subsequent nine years, steep increases in urban land values, construction raw materials (cement, steel), and municipal charges have made it economically unviable for developers to construct two-bedroom family homes at or below ₹45 lakh in major metropolitan areas.
What are CREDAI’s proposed carpet area revisions?
CREDAI recommends revising the affordable housing carpet area limits to:
- Metro Cities: Up to 90 square meters (approx. 968 sq ft), up from 60 sq m.
- Non-Metro Cities: Up to 120 square meters (approx. 1,291 sq ft), up from 90 sq m.
How much has affordable housing sales dropped in India?
Affordable housing’s share of total residential sales across India’s top seven cities has fallen from nearly 38%–40% in 2019 to under 18% in 2026, as private developers have largely exited budget segments due to compressed margins
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